South Korea: Stocks lose 2019 gains as trade war continues

[SEOUL] South Korea's $1.3 trillion stock market became the latest victim of the US-China trade war, with its benchmark index losing all of this year's advance on Wednesday.

The Kospi index fell 1.3 per cent to 2,023.32 at the close in Seoul, its lowest since Jan 4. Foreign investors sold a net 360 billion won (S$416 million) of Kospi shares as of 3.52 pm Seoul time.

The Korean market became the second in Asia to forfeit gains made in 2019, after losing gains in intraday trading several times in the past week. 

The selloff in Korean stocks came as earnings for Kospi members fell an average 36 per cent in the first quarter amid weak economic growth.

Trade tensions between the US and China have soured investor sentiment for Korean stocks, especially in technology, as well as cyclical and consumer stocks tied to China. Roughly two-thirds of Korea's semiconductor exports go to China.

Overseas investors have offloaded about 2.3 trillion won of Kospi shares in May, as the Korean won fell to a two-year low to be Asia's worst currency.

Samsung Electronics Co, the biggest stock on the gauge by weighting, was down 1.8 per cent Wednesday on concerns that the world's largest memory-chip maker would be hit by shrinking demand due to the deepening trade disputes between the US and China. Semiconductor accounts for about a fifth of South Korea's exports.

"It would be hard to expect a radical rebound for the Kospi index unless the US and China reach an agreement over the trade conflict," said JPMorgan analyst JJ Park.

The Kospi is trading at about 10.6 times of its 12-month forward earnings, the highest level since June 2016. The market's estimates on the earnings of Korean companies are being lowered, especially for the technology sector, Mr Park said.

BLOOMBERG